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Monthly Archives: December 2009

A group of investors in Allen Stanford’s alleged Ponzi scheme are demanding a powerful Texas congressman give them the same kind of support he showed Stanford when regulators shut down the alleged scam in February.

The Miami Herald reported Sunday that on February 17, the day the Securities and Exchange Commission charged Stanford with a massive fraud, Republican Congressman Pete Sessions wrote an e-mail to Stanford saying, “I love you and believe in you. If you want my ear/voice—e-mail.”

The Herald says the Justice Department has launched a “sweeping” investigation into Stanford’s ties to Sessions and other lawmakers from both parties. A Justice Department spokeswoman declined to comment to CNBC about the report, because it is “an ongoing case.”

But the Stanford Victims Coalition, which claims to represent some 28,000 investors, is seizing on the report to demand Sessions come to their aid.

“While Congressman Sessions was writing that email to Allen Stanford on that fateful day in February,” writes Coalition founder Angela Shaw in a letter to Sessions’ office, “panic struck the lives of Stanford investors as they feared the worst—that their retirement plans, their children’s’ college savings, their life’s savings would never be recovered.”

Shaw, who lives in Sessions’ Dallas Congressional District, notes that Sessions has been supportive of the Stanford investors in the past, including signing a letter from 48 members of Congress to SEC Chairwoman Mary Schapiro earlier this year seeking coverage for the investors under the Securities Investor Protection Act.

Now, armed with Sessions’ e-mail to Stanford, Shaw is demanding the Congressman step up his fight for the coverage, which would allow the investors to collect as much as $500,000 in insurance proceeds from the Securities Investor Protection Corporation, which, so far, has refused to cover the Stanford investors.

“I implore Congressman Sessions to do the right thing and help Stanford victims obtain SIPC coverage,” Shaw writes, adding, “We need the kind of genuine support he showed Allen Stanford in February.”

Sessions, the Chairman of the Republican Congressional Campaign Committee, was among a bipartisan group of lawmakers who came to be known as the “Caribbean Caucus” as a result of their frequent trips to the region–trips funded by a Stanford-backed non-profit organization. He has received $44,375 in campaign contributions from Stanford and members of his staff, according to the Miami Herald.

Sessions’ press secretary, Emily Davis, has defended the Congressman, saying in a statement to Politico this week that “Allen Stanford had everyone fooled,” and insisting Sessions has worked to ensure that investors get justice.

As for the e-mail, Davis says while it “cannot be authenticated, Congressman Sessions believes that its contents represent language he would use to communicate with a person in crisis to encourage right decisions and prevent further tragedy.”

The statement appears to ring hollow with the Victims Coalition. In her letter to Sessions’ office, Shaw notes, “his reputation is on the line—along with our financial futures.”

They argued in their pre-Christmas filing with Hittner that Stanford’s health has deteriorated during the six months that he has been in custody since his June indictment.

The defense attorneys added that a prison beating Stanford suffered in September contributed to his decline.

Schaffer and Secrest also argued the millions of documents involved in Stanford’s criminal case make it impossible for him to meaningfully participate in the planning of his defense while he remains at the federal detention center in Houston.

Another key point in their argument referred to confessed swindler Bernard Madoff of New York, who was allowed to remain free on bond before he pleaded guilty to felony charges that netted him a prison term of 150 years.

Madoff, whose frauds totaled more than $50 billon, and several other recently convicted white-collar criminals did not flee prior to their convictions, Schaffer and Secrest noted.

Stanford appealed Hittner’s initial refusal to permit him release on bond to the 5th U.S. Circuit Court of Appeals in New Orleans.

The 5th Circuit panel also said in August: “Stanford has the means, the motive and the money to flee.”

In Baton Rouge on Monday, attorney Winston G. Decuir Jr. said Stanford’s new argument concerning the pre-trial release of Madoff and other white-collar criminals might justify another appeal to the 5th Circuit. Decuir is not involved with the Stanford case.

Decuir, who regularly practices in federal courts, said Stanford’s argument for pre-trial release does not carry a high chance of success.

“It wouldn’t surprise me to see federal prosecutors use the Bernie Madoff case the other way,” Decuir said, noting that Madoff received a prison term of 150 years.

“No one expected Bernie Madoff to get that kind of time,” Decuir said.

Younger people convicted of massive white-collar crimes might not run from a 10-year prison term, Decuir said.

Many people might be tempted to run from possible prison terms in excess of a century. And prosecutors probably would use that argument in any debate over Stanford’s requested release, Decuir added.

The 5th Circuit also may not be impressed by Stanford’s argument that he needs release from prison to help his attorneys sift through millions of documents, Decuir said.

“Today, you can put a million pages on a CD-ROM, slap it in a laptop and meet with your client in prison,” Decuir noted.

Stanford has developed heart problems since his arrest and undergone surgery for an aneurysm, his attorneys told Hittner last week.

When Stanford was beaten at a detention center near Conroe, Texas, his attorneys told the judge, he suffered a broken nose and fractures near his right eye that required reconstructive surgery.

The attorneys added that Stanford has lost 40 pounds and sometimes coughs up blood.

Decuir said, however, that reports of deteriorating health often are not “sufficient to persuade a judge to change his or her mind.”

Chief Magistrate Ivan Walters has set January 25 as the date for the start of extradition proceedings against former head of the Antigua and Barbuda’s Financial Services Regulatory Commission (FSRC), Leroy King. United States law enforcement authorities have requested King on charges of helping disgraced Texan billionaire, Sir Allen Stanford, cover up an alleged US$7 billion Ponzi scheme. King, 63, has been charged by the Securities and Exchange Commission (SEC) with taking bribes to ignore wrong doing in relation to the alleged Ponzi scheme. He is facing 10 counts of conspiracy to commit mail fraud, seven counts of conspiracy to commit wire fraud, conspiracy to obstruct the SEC and conspiracy to launder illegal proceeds. The SEC’s complaint alleges that King facilitated the Ponzi scheme by ensuring that the FSRC conducted sham audits and examinations of Stanford International Bank Limited’s books and records.

Just hours after federal agents charged banker Allen Stanford with fleecing investors of $7 billion, the disgraced financier received a message from one of Congress’ most powerful members, Pete Sessions.

“I love you and believe in you,” said the e-mail sent on Feb. 17. “If you want my ear/voice — e-mail,” it said, signed “Pete.”

The message from the chair of the Republican National Congressional Committee represents one of the many ties between members of Congress and the indicted banker that have caught the attention of federal agents.

The Justice Department is investigating millions of dollars Stanford and his staff contributed to lawmakers over the past decade to determine if the banker received special favors from politicians while building his spectacular offshore bank in Antigua.

Agents are examining campaign dollars, as well as lavish Caribbean trips funded by Stanford for politicians and their spouses, feting them with lobster dinners and caviar.

The money Stanford gave Sessions and other lawmakers was stolen from his clients while he carried out what prosecutors now say was one of the nation’s largest Ponzi schemes.

Sessions, 54, a longtime House member from Dallas who met with Stanford during two trips to the Caribbean, did not respond to interview requests.

Supporters say the lawmaker, who received $44,375 from Stanford and his staff, was not assigned to any of the committees with oversight over Stanford’s bank and brokerages.

His press secretary, Emily Davis, said she was unable to comment on the e-mail sent at 11:31 a.m. on the day Stanford was charged by the U.S. Securities and Exchange Commission. “I haven’t seen it, so I can’t verify its authenticity at this time,” she said.

But the message found on Stanford’s computer servers and the contributions he made to Sessions and other lawmakers — totaling $2.3 million — are now part of the government’s inquiry.

Records show Stanford also doled out $5 million on lobbying since 2001, setting up his own Washington firm last year with expensive furnishings and artwork — the money plundered from his customers’ accounts.

D.C. CONNECTIONS

Over the years, he took on battles to protect his banking network while fending off regulators.

In 2001, he pressed successfully to kill a bill that would have exposed the flow of millions into his secretive offshore bank in Antigua.

The next year, he helped block legislation that would have drawn more government scrutiny to his bank.

While he was fighting reforms to financial secrecy and offshore banking laws, Stanford was hobnobbing with dozens of lawmakers.

Stanford hosted New York Congressman John Sweeney’s wedding dinner at his five-star restaurant in Antigua in 2004 — toasting the couple for photographers — and staged a cocktail fundraiser for now-disgraced Ohio congressman Bob Ney at his bayfront Miami office.

“He legitimized himself by having himself vetted by powerful members of Congress,” said Steven Riger, a former vice president at Stanford’s Miami brokerage. “It was all about the public’s perception.”

Kent Schaffer, Stanford’s court-appointed attorney, said his client never asked for special favors. “Stanford gave contributions to politicians, but there was nothing criminal behind it,” he said.

The federal investigation comes after months of criticism from victims’ groups complaining that elected leaders failed to vet Stanford before accepting money from him the past 10 years. If they had, they would have discovered that the U.S. State Department in 1999 concluded that Stanford helped create a haven for money-laundering in Antigua.

Fallen financier R. Allen Stanford won’t be released from jail before his fraud trial in 2011, a U.S. judge ruled after reviewing a doctor’s report that the accused is close to “a complete nervous breakdown.”

Attorneys for Stanford, who faces 21 criminal counts for allegedly swindling investors out of more than $7 billion, asked U.S. District Judge David Hittner in Houston yesterday to reconsider his earlier ruling denying bail out of concern the defendant might flee. They submitted reports from two psychiatrists who’d examined Stanford, 59, and found him suffering from severe depression triggered by his incarceration under conditions that render him unable to help in his defense.

“Having considered the motion along with the exhibits attached thereto, and the applicable law, the court determines the motion should be denied,” Hittner wrote in an order today.

Stanford has been jailed since his arrest June 19 and is in a federal detention center in downtown Houston. Stanford’s lawyers said in a Dec. 21 filing that one of the psychiatrists determined that the financier’s mental and physical health had deteriorated sharply.

“If the present set of circumstances persist, Mr. Stanford’s spiraling downhill course will continue to the point where he will suffer serious physical disorders and, more likely than not, a complete nervous breakdown,” the doctor’s report said, according to the filing.

Stanford and three former top executives at Stanford Financial Group are charged with running a Ponzi scheme that paid above-market rates to early investors by taking money from later investors in certificates of deposit sold by Antigua-based Stanford International Bank. Stanford is accused of skimming about $1.6 billion from depositors to fund a lavish lifestyle that included a fleet of jets, yachts, multiple homes and a private island in the Caribbean.

Stanford faces spending the rest of his life in prison if he’s convicted at a trial set to begin in January 2011. The financier denies all wrongdoing in connection with both the criminal case and the parallel civil fraud lawsuit brought against him and the same associates by the U.S. Securities and Exchange Commission.

Stanford’s lawyer complained that without Internet access and frequent communication with his defense team, the jailed financier cannot adequately review more than 7 million documents in the government database or answer questions from attorneys and accountants hired to defend him.

“The issues we raised were real, as well as legally and factually compelling,” attorney Kent Schaffer said in an e-mail today. “I am surprised that we were shot down so abruptly and without a response from the government or a hearing. I am not sure how Allen will be able to participate in assisting in his own defense and, the truth is, he probably won’t be.”

A psychiatrist who examined R. Allen Stanford believes he is in danger of suffering “a complete nervous breakdown” if he is not released from prison on bail and allowed to properly prepare for his scheduled criminal trial, according to court documents.

In documents asking that the jailed businessman be released on bail, attorneys argue Stanford’s deteriorating mental and physical health, combined with the difficulty of seeing his attorneys while at the downtown Houston Federal Detention Center, make it impossible for him to properly prepare for trial.

The court documents include letters from more than two dozen family and friends who say Stanford would not flee if released. “I can guarantee you that my dad will go nowhere if released on bail,” one of his sons wrote. “He knows that running would get him nowhere, it would only make things worse.”

Stanford has been in federal custody since June 18, shortly after a Houston grand jury indicted him and others accused of cheating investors who bought certificates of deposit from his bank on the Caribbean island of Antigua. He faces 21 counts of conspiracy, fraud, bribery and obstruction of justice.

After his arrest in Virginia Stanford was brought to Houston, where a magistrate court judge ruled on June 25 he could remain free if he posted $500,000 bail and wore a tracking device.

But before the release paperwork was completed the government appealed the order to U.S. District Court Judge David Hittner, who ruled that Stanford is a flight risk and ordered he remain in custody.

Prosecutors have not yet responded to the new request for bail.

In the weeks after his arrest, while held at the Joe Corley Detention Center in Conroe, Stanford was hospitalized repeatedly for heart problems and for treatment following a beating from a fellow inmate. He was transferred to the downtown detention center on Sept. 29.

The physical and mental strains of imprisonment have taken a heavy toll on Stanford, according to court filings: He has lost 40 pounds in the last 90 days, and has been prescribed medications for elevated and irregular heartbeats, ulcers and depression.

Victor Scarano, a Houston psychiatrist and lawyer who examined Stanford in jail, concludes that his “physical and mental state is continuing to deteriorate” and he is suffering “major depression.”

“If the present set of circumstances persist, Mr. Stanford’s spiraling downhill course will continue to the point where he will suffer further serious physical disorders and, more likely than not, a complete nervous breakdown,” Scarano says, according to the court documents.

Scarano doubts that anti-depressants would be enough to treat the condition but giving Stanford the freedom “to work with his attorneys in creating a strong and formidable defenses, is the treatment that will do the most to enhance his physical and mental recovery,” according to the filing.

It says the limited visiting hours and security measures at the detention center make it “sheer sophistry” to assume Stanford would be able to review even a fraction of the more than 7 million documents involved in the case to prepare for his trial, now scheduled for January 2011.

Attorneys argue that there are other ways than incarceration for assuring Stanford will not flee, including putting him in home confinement with an armed guard, a measure his lawyers say New York federal courts have used successfully.

Stanford’s defense team notes several cases where wealthy, well-traveled individuals accused of massive white collar fraud have been allowed to remain free on bail with few restrictions. They include Bernard Madoff, who later pleaded guilty in a massive Ponzi scheme and is serving prison time, and hedge fund manager Raj Rajaratnam, accused of insider trading, who remains out on bail.

Attorneys included dozens of letters from Stanford’s family and friends pleading with Judge Hittner to free Stanford pending trial. The letter writers include his parents, fiancé, and five of his six children.

His son Robert A. Stanford Jr. wrote that his father taught him to “never run away” from a problem.

“My dad won’t back down from this case until he finally proves to the world that he is not guilty,” the younger Stanford wrote.